Business Segment Information

12 Months Ended

Jun. 28, 2014

Business Segment Information

Business Segment Information

The company is a leading producer and marketer of high quality, branded food products in North America. The company manages the business in two operating segments which are based on customer type, as each segment requires different distribution and marketing strategies.

The following are the company's two business segments and the types of products and services from which each reportable segment derives its revenues.

• Retail sells a variety of packaged meat, frozen breakfast and frozen bakery products to retail customers in North America. It also includes gourmet artisanal sausage, salami and jerky products.

• Foodservice/Other sells a variety of meats and bakery products to foodservice customers in North America such as broad-line foodservice distributors, restaurants, hospitals and other large institutions and includes commodity meat products.

The company's management uses operating segment income in order to evaluate segment performance and allocate resources, which is defined as operating income before general corporate expenses; mark-to-market derivative gains/(losses); and amortization of trademarks and customer relationship intangibles. Significant items represent various income and/or expense items related to restructuring actions and other gains and losses that are not considered to be part of the core business results. The company believes that these results are more indicative of the company's core operating results and improve the comparability of the underlying results from period to period. Interest and other debt expense, as well as income tax expense, are centrally managed, and accordingly, such items are not presented by segment since they are not included in the measure of segment profitability reviewed by management. The accounting policies of the segments are the same as those described in Note 2 - Summary of Significant Accounting Policies.

In millions	2014			2013			2012
Sales
Retail	$	2,992		$	2,894		$	2,884
Foodservice/Other	1,093			1,026			1,025
	4,085			3,920			3,909
Impact of businesses exited/disposed	—			—			55
Intersegment	—			—			(6		)
Total	$	4,085		$	3,920		$	3,958
In millions	2014			2013			2012
Income (loss) from Continuing Operations before Income Taxes
Retail	$	339		$	329		$	313
Foodservice/Other	87			75			79
Total operating segment income	426			404			392
General corporate expenses	(38		)	(36		)	(64		)
Mark-to-market derivative gain/(loss)	4			(1		)	(1		)
Amortization of intangibles	(5		)	(4		)	(4		)
Significant items	(81		)	(72		)	(255		)
Impact of businesses exited/disposed	—			6			8
Total operating income	306			297			76
Net interest expense	(39		)	(41		)	(72		)
Debt extinguishment costs	—			—			(39		)
Income (loss) from continuing operations before income taxes	$	267		$	256		$	(35	)

Net sales for a business segment may include sales between segments. Such sales are at transfer prices that are equivalent to market value.

Revenues from Wal-Mart Stores Inc. represent approximately $1.1 billion of the company's consolidated revenues for continuing operations in 2014, and 1.0 billion in 2013 and 2012, all within the Retail segment.

In millions	2014		2013		2012
Assets
Retail	$	1,560	$	1,273	$	1,279
Foodservice/Other	564		542		530
	2,124		1,815		1,809
Australian Bakery	—		—		58
Net assets held for sale/disposition	—		—		5
Other1	584		619		578
Total assets	$	2,708	$	2,434	$	2,450
Depreciation
Retail	$	101	$	90	$	101
Foodservice/Other	27		28		30
	128		118		131
Discontinued operations	—		2		104
Other	3		28		31
Total depreciation	$	131	$	148	$	266
Additions to Long-Lived Assets
Retail	$	368	$	95	$	128
Foodservice/Other	32		28		38
	400		123		166
Other	—		16		7
Total additions to long-lived assets	$	400	$	139	$	173

¹ Principally cash and equivalents, certain corporate fixed assets, deferred tax assets and certain other non-current assets.

Net sales by product type within each business segment are as follows: 

In millions	2014		2013		2012
Sales
Retail
Meat	$	2,167	$	2,103	$	2,117
Convenient Foods	730		685		647
Bakery	94		104		118
Commodities/Other	1		2		2
Total Retail	2,992		2,894		2,884
Foodservice/Other
Meat	557		507		520
Convenient Foods	93		88		86
Bakery	343		343		344
Commodities/Other	100		88		75
Total Foodservice/Other	1,093		1,026		1,025
Total business segment sales	4,085		3,920		3,909
Impact of businesses exited/disposed	—		—		55
Intersegment elimination	—		—		(6		)
Total net sales	$	4,085	$	3,920	$	3,958

Meat category includes lunchmeat, hot dogs, breakfast sausage, smoked sausage and other meat products. Convenient Foods category includes breakfast sandwiches, breakfast convenience, corn dogs and other ready to eat meal items. Bakery category includes cakes, pies, cheesecakes and other bakery products. Commodities/Other category includes commodity turkey and pork.

Hillshire Brands' operations are principally in the United States. With respect to operations outside of the United States, no single foreign country or geographic region was significant. Foreign net sales were $17 million, $17 million and $18 million in 2014, 2013, and 2012, respectively, all of which was in Canada. The long-lived assets located outside of the United States are not significant.